Monday, March 2, 2015
Wages in the service sector lead
- by New Deal democrat
Some of the most interesting relationships I've ever uncovered have been the result of total serendipity. So it was last week when I examined the relationship between wages in the goods-producing vs. service sectors of the economy.
I found that tepid GDP growth is correlated with lackluster growth in jobs in the goods-producing sector, and that wage stagnation is primarily found in the goods-producing vs. service sector.
Here is something I found totally by chance: wage growth both peaks and troughs in the service sector almost always before it peaks and troughs in the goods-producting sector.
Here are two graphs going back 50 years of the YoY% change in wage growth. The goods-producing sector is in blue, sercices in red.. First, here's 1954 to 1982:
And here is 1983 to the present:
In every instance but one in the last 50 years (1980) growth in service wages peaks before growth in goods-producing wages. In all but two (the early 1990s and 2012), growth in service sector wages bottom before those in goods-producing industries.
In 2014, service sector growth started down, followed by the goods-producing industires. If we see an increase in the growth of service sector wages, it is a good bet that manufacturing and construction will follow.
Unfortunately, because the goods-producing sector has shrunk to a small share of the overall labor force over time, while service sector wage growth led overall wage growth in the 1960s and 1970s:
since then the service sector has so dominated the labor force that since the 1980s, the two measures have become coincident:
So, an interesting phenomenon, but of limited forecasting value.